First meeting of 15th finance commission

In news

Meeting for the first time after its constitution last week, the 15th Finance Commission on Monday decided to involve various research organisations across the country.

The committee’s chairman N K Singh said that this would help in engaging all stakeholders to decide on issues which concern not only the Centre, but states as well.

Highlights

The panel will decide on devolution share of states from central taxes as well as suggest measures to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities.

The panel has been asked to take into account the impact of the GST, including payment of compensation for possible loss of revenues for 5 years, and abolition of a number of cesses, earmarking thereof for compensation and other structural reforms programme, on the finances of Centre and States.

The commission would also involve consultations with stakeholders involving ministries and local bodies.

Basic Gyan

What is a Finance Commission?

It is a body set up under Article 280 of the Constitution. Its primary job is to recommend measures and methods on how revenues need to be distributed between the Centre and states.

What does the finance commission do?

The commission has to take on itself the job of addressing the imbalances that often arise between the taxation powers and expenditure responsibilities of the centre and the states, respectively. Primarily, it has to ensure a sense of equality in public services across the states.

What does it means to States?

As against a total devolution of Rs. 3.48 lakh crore approximately in 2014-15, the total devolution to the States in 2015-16 will be Rs. 5.26 lakh crore approximately, a year-on-year increase of Rs. 1.78 lakh crore approximately

What will the impact of this recommendation if accepted by the Centre?

“The higher tax devolution will allow States greater autonomy in financing and designing schemes as per their needs and requirements,” says the report. Practically, it will give more power to states in determining how they spend this money.

What is the implication of this recommendation?

Well, it comes at a time when the Centre is trying to push GST (goods and services tax). Perhaps, higher devolution will help to reassure the States that they will not be at the wrong end of the stick if GST is introduced.

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